After a few days out of the office, I found myself yesterday thrown into a hectic schedule of analyst briefings and development calls. At the end of the day, one fact was undeniable - there’s a definite buzz in the optical networking space. As I mentioned in an earlier post, our global networks are at the first stage of what Infonetics Research is calling an optical reboot: The rebuilding of the networks’ core on a foundation of 40/100G, OTN and ROADM technologies.

The success of this rebuild is critical for every member of the networking ecosystem, from businesses aiming to leverage the latest cloud computing applications to reduce IT costs and complexities, to domestic users seeking to consume rich-media applications across a range of devices, and even service providers intent on providing a high-quality of service while at the same time growing profitably. The optical reboot is the first step to ensuring our networks evolve into a flexible infrastructure that can scale to meet tomorrow’s bandwidth demands.

Without question, this reboot presents a significant opportunity to the companies with the right technology to build the required networking infrastructure. This opportunity has caught more than the attention of the industry media and appears to have spread to a number of high-profile venture capitalists. Ben Horowitz is one such example. Usually an investor in social media platforms, such as Foursquare, Dig and Groupon, Horowitz is now investing in networking infrastructure and is openly encouraging others to do the same. He's confident that the growth of cloud computing is about to unleash a big new wave of technological innovation.

Horowitz believes current networking technology has reached its capacity and is unable to cope with businesses’ demands for more advanced cloud-computing solutions. This is certainly a trend confirmed by many industry analysts who see spending on optical hardware increasing in 2011, especially in the core of the network. Without this spending it will be impossible for the network to transport the enormous amounts of data required to make cloud computing and other bandwidth-intensive applications work.

The growth in the optical market recently led to a conversation with a journalist on whether we’ll see another Internet bubble. I was thinking about this question over the weekend as I read a New York Times’ piece debating the topic. In the chart opposite, it’s clear to see the massive valuations on some of today’s hottest tech companies. However, comparing 1999 to 2011, there’s a critical distinction. In 1999, most of the companies were focused on hardware. Today, it’s software and applications. Facebook, Twitter, Foursquare. There isn’t one hardware company included. I find this shift fascinating.

What’s undeniable though is that these incredibly high valuations wouldn’t be possible without the enabling hardware. As Horowitz noted, the big wave of technological innovation is coming. I for one believe that it’s going to be an exciting ride ahead. Are you seeing the same buzz in the optical space? Will hardware begin to attract more attention as bandwidth-intensive applications continue to hit the market? What do you think?